Members Voluntary Liquidation

Members Voluntary Liquidation / QUICK LINKS

Release the assets

Did you know...It's possible to reduce tax rates applied to the distribution back to shareholders.

A Members Voluntary Liquidation (MVL) is where the shareholders of a solvent company go through a voluntary winding-up resolution and appoint a Liquidator to realise the assets of the business to enable a distribution of the proceeds to company members. An MVL is the formal liquidation option for solvent companies.

Benefits of a Members Voluntary Liquidation (MVL)

There are many benefits of a MVL including:

Retirement and sale of company assets

The company no longer wishes to trade forward

Shareholders wish to exit their position and extract their funds with distributable reserves over £25,000

Restructuring of company assets

To enter into an MVL the shareholders must provide a sworn Declaration of Solvency, which states that the company's balance sheet and finances have been fully reviewed and they have confirmed that the company is solvent and able to reasonably repay all existing and prospective debts within a 12-month period.

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Tax Advantages of Members Voluntary Liquidation

When looking to dissolve a solvent company, we need to establish the amount of shareholder distributions that need to be made. If funds exceed £25,000 you will be subject to income tax on the shares instead of capital gains tax by not entering into a MVL, which would apply a lower capital gains rate.

The major benefit of the MVL are the reduced tax rates applied to the distribution back to shareholders.

On 1 March 2012, the ESC C16 legislation was enacted which meant that shareholder funds that exceeded £25,000 would receive tax benefits if they entered into a formal liquidation; A Members’ Voluntary Liquidation.

The main tax advantages of Members’ Voluntary Liquidation allow for funds to be classed as capital receipts and the funds potentially subjected to Entrepreneurs’ Relief which is a personal tax relief that will reduce the tax rate down to 10%.

Entrepreneurs’ Relief

Entrepreneurs’ Relief is:

Available to individuals disposing of shares in a trading company where they were an officer (or employee) holding at least 5% of the voting rights

Allows relief on lifetime gains up to £10 million

Effectively reduces the tax rate on any capital gain to 10%.

What is the MVL process?

The process can vary case to case, depending on the situation of your company and what assets your company has. Below is a brief guide to the MVL process:

As the director of the Limited company you will need to appoint a Liquidator, who must be a Licensed Insolvency Practitioner.

The Liquidator will advertise in The London Gazette (or the Edinburgh Gazette) a Statutory Notice of his appointment.

A notice of insolvency will be submitted to HMRC.

A post liquidation VAT return will be completed by the Liquidator and de-registration.

We will write to your bank to close the account and receive company funds.

After 1 month, the Liquidator will distribute funds to the shareholders.

A final report will be prepared to the shareholders and a meeting is held.

A final corporation tax return will be submitted for the post-liquidation period.

Once you provide us with instruction and Clark Oliver are appointed on an MVL, our main aim is to carry out the dissolution of the company in a time efficient manner. With the company being solvent the main goal is for us to provide funds back to shareholders as quickly possible.

Please contact us to arrange a free initial consultation in the strictest of confidence.